Given an Open Economy with High Capital Mobility and Floating

Multiple Choice

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary fiscal policy is implemented to combat recession.Other things equal, the initial and secondary effects of the policy

A) cause aggregate demand to increase, thus strengthening the policy's expansionary effect on real output.
B) cause aggregate demand to decrease, thus eliminating the policy's expansionary effect on real output.
C) have conflicting effects on aggregate demand, thus weakening the policy's expansionary effect on real output.
D) have conflicting effects on aggregate demand, thus strengthening the policy's expansionary effect on real output.